Why insurers believe gender must continue to be a factor when setting premiums
Insurers have won the battle of the sexes after the treasury decided this week that gender should continue to be a factor in pricing.
The EU Gender Directive, to be transposed into UK law on 21 December, initially evoked outcries within the insurance industry after it was discovered the European Commission was drafting a proposal outlawing sexual discrimination which could mean insurers would no longer be allowed to price according to gender.
The proposal was based on Article 13 of the Treaty of the European Union which allows the EU to take measures to combat discrimination based on race, sex, ethnic origin, religion or belief, disability, age or sexual orientation.
Leading insurers immediately began lobbying against the proposal claiming the new rules could harm profitability.
It was also argued, by the ABI, that the new law could essentially hurt both genders by driving up women’s premiums, despite statistical evidence showing they are less likely to be involved in collisions and also affecting men as they currently receive a higher annual income from an annuity due to their shorter life expectancy.
In June, Zurich's head of motor underwriting Dave Swann told Insurance Times: "If implemented the proposal could lead to a problem for us. The frequency of accidents is similar in men and women, but the average cost of claims is lower in women. So we try to reflect this in our ratings.
"If we had to change this approach it could hurt our profitability. We may have to increase women drivers' premiums to cover this."
AA research has shown that young men drivers represent the highest risk and that they were six times more likely to be killed on the road than their parents.
This week insurers were officially told they would not have to be gender neutral, with the government recognizing different groups of people represent different risks for certain types of insurance.
The ABI has applauded the decision to allow insurers to consider gender a factor when setting premiums.
An ABI spokesperson said: “Insurance should always reflect risk as accurately as possible and the use of data which shows differences between the sexes is crucial to that important principle. The Government should be applauded for securing risk pricing, and ensuring consumers continue to benefit from premiums which reflect actual risks.”